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By ALM First Financial Advisors
A few months back, some market prognosticators ventured a guess that the worst of the market dislocation was behind us.
As most in the financial community are aware, what started out as a subprime issue has spread into a severe lack of consumer confidence, draining liquidity from many sectors of the markets as never seen before, and causing “groundhog day” episodes of price losses. Subprime and Alt-A defaults, FASB mark-to-market requirements, troublesome government intervention, combined to create the perfect storm. The government has designed a $700 billion bailout in an attempt to halt the “vicious circle” that has resulted from forced security divestitures into a market with no demand. Because the government is able to “hold securities to maturity,” it will have a comparative advantage as a bidder and hopefully help prices find a floor.
The responsibility of the U.S. Treasury is to give consideration to the goals of providing financial system stability, and protecting taxpayers’ interests. The U.S. government can now take equity stakes in some participating financial institutions and will have some power over executive compensation. Before the Senate approved the bill in early October, a number of provisions were added, unrelated to the “troubled asset relief program” (TARP). These include a temporary increase of FDIC and NCUA insurance limits from $100,000 to $250,000, and some unrelated tax breaks. This is a good thing and should relieve the worry of depositors.
So, what should your credit union do in this environment?
There’s no doubt these are tough economic times for markets. But by staying focused on the long-term picture, making a few adjustments and keeping a strong resolve, your credit union can tough it out.
For more information on balance-sheet strategies during any economic environment, please contact Emily Moré Hollis, CFA at ALM First Financial Advisors, (800) 752-4628, or visit www.almfirst.com.
This sponsored content article is provided to the credit union community for shared insights and knowledge from a recognized solutions provider in the industry. Please note that the views and opinions offered here do not reflect those of Callahan & Associates, and Callahan does not endorse vendors or the solutions they offer.
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November 10, 2008
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